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Issues: Whether duty and reversal of Cenvat credit could be demanded from the successor of a deceased sole proprietor for a period prior to the insertion of the proviso to Section 11 of the Central Excise Act, 1944, and whether the successor could be fastened with liability under Rule 9(2) of the Cenvat Credit Rules, 2001/2002.
Analysis: The demand was founded on the proposition that, on surrender of registration, the unit was deemed to have opted out of the Cenvat scheme and was therefore required to reverse credit relatable to inputs in stock. The decisive question was whether the successor could be proceeded against at all. The proviso to Section 11 enabling recovery from a successor in business was inserted only with effect from 10.09.2004. The demand in issue arose from a period anterior to that amendment. The reasoning adopted in the earlier precedent, as affirmed by the High Court, was that in the absence of an operative statutory provision for that period, the revenue could not recover the dues from the successor.
Conclusion: The successor was not liable for the impugned demand for the pre-amendment period, and the demand could not be sustained under Section 11 of the Central Excise Act, 1944. The order confirming duty and related liability was set aside.
Ratio Decidendi: A successor in business cannot be fastened with excise duty liability for a period prior to the insertion of the statutory proviso authorising recovery from a successor, and such amendment does not operate retrospectively.
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